The Superannuation Game

Just been reading about superannuation. Surprise, surprise, it's all a big scam.

Super fund directors, regulators, union officials and members of both major political parties are all in bed together, using the system to avoid paying their proper tax rate, to award contracts to their mates (rather than the best investments), to exchange valuable 'grey gifts', to charge higher fees, bundle in expensive insurance & financial products many are unlikely to use, get in on the legislation, and generally screw the public. And it all goes on invisibly.

"The union movement is now deeply handicapped by the trade in grey gifts available to its bosses via superannuation funds, because it greatly reduces the incentives of union bosses to fight for the rights and interests of their workers. On the contrary, union bosses now have every incentive to keep their members quiet and docile, which is one of the reasons why Australia now has hardly any strikes by unions...The role of unions in superannuation funds has also been a device for corporations to get lucrative contracts."

This reminds me of the time an old friend of mine Morgan, who is no longer with us, was speaking to me about his experience with the CFMEU.

Apparently he and some colleagues had some grievance to settle with their employer and he consulted the union about having a strike. They said he had a legitimate claim and that the strike should go ahead with the support of the union.

The strike took place, and he called the union back afterwards, who then said "oh, you didn't actually DO it, did you?!" he said they had, and they were told that they only supported the strike in principle, but due to the fact that they had a lucrative contract with my friends employer, they would not only withdraw support for the strike, but they would also hand over the names of all the organisers.

My friend lost his job.

The superannuation system is also a source for well connected, wealthy individuals to funnel their income through super to avoid paying proper tax rates.

If you have an income of $180,000-$300,000 and you are well-connected enough, you can funnel you're entire income through your superannuation and pay 15% instead of 49%. This tax breaks mostly flow to the top 20% of income earners.

The rights to which super fund you are recommended by your union is also a commodity that is up for trade, often encouraging people to join funds with many hidden fees and unnecessary financial products bundled in.

Changing the rules is difficult due to heavy lobbying.

"Treasurer Peter Costello introduced a superannuation surcharge on high-income funds to combat the discrepancy in tax treatments between low and high income earners, which had been an election promise. Though after much intense lobbying from the industry, and in a time of relatively low political risk, it was scrapped in 2005, with an estimated loss in tax revenue of %2.5 billion over the following four-year federal budget projections."

And that's just the beginning. Union power in the superannuation system is also a problem...

"31% of directors, and over two-thirds of the 'independent member representatives, were appointed by unions. In the bigger funds...92% of the spots theoretically available for member representatives were union appointments with very few having expertise in superannuation."

That's because the primary reason they are there is to reap the benefits and pass on favours to mates.
Corrupt senior officials such as Craig Thomson formerly of HESTA have even been caught using funds for their own use, including using money for his own campaign as a Labor MP, as well as for escort services. He was ordered to pay back nearly half a million dollars in fines.

How much do we loose?
"In terms of reduced taxation for the wealthy...the answer can be found in the federal budget, where the estimated loss in taxes is calculated annually. In the 2015-16 financial year the total loss from these tax breaks was $28 billion, or around, 7% of the total federal tax revenue!"
Consider that one of the purposes of the superannuation system is to take pressure off the government budget for future pensions by forcing people to save. Then consider this:
"Treasury found that the cost of tax breaks given to the wealthiest superannuation account holders far exceeds any savings on the cost of pensions from having a superannuation system by an enormous margin (Treasury 2013)."
That doesn't include any grey gifts being traded in the superannuation system, which is hard to put a value on.